EUR/USD is very heavy in the short term, it has ignored the near-term support levels and now it is approaching new lows. Yesterday's US data has strengthened the dollar, the ISM Non-Manufacturing PMI was reported at 41.8 points, far above the 37.5 estimates.
The pair should drop further if the USDX resumes the bullish momentum. USDX has rebounded and it looks strongly bullish, some poor eurozone's data and a good US ADP Non-Farm Employment Change could force EUR/USD to hit fresh new lows.
EUR/USD is trapped between 1.0989 and 1.0777 levels, it has increased after the false breakdown below the first warning line (wl1) of the ascending orange pitchfork. The price has registered only a false breakout above the 1.0989 level and now trading below the warning line (wl1) and below the S1 (1.0853) level.
I've said in my previous analyses that a valid breakdown below the warning line (wl1) will validate a further drop on EUR/USD. The next downside target is seen at the 1.0777 static support.
- EUR/USD TRADING TIPS
The breakdown below the warning line (wl1) and below the S1 (1.0853) suggests a further drop in the short term. EUR/USD will register a significant decrease if it will take out the 1.0777 static support. We could sell EUR/USD if it tests and retests the broken support levels, a false breakout with great separation above S1, and above the warning line (wl1) will signal a sharp drop.
So, a valid breakdown from the extended sideways movement will announce a potential drop of approx 215 pips. EUR/USD is bearish as long as it stays below the S1 and below the warning line (wl1), only a strong increase and a valid breakout above the Pivot Point (1.0934) will invalidate a larger drop.
A long opportunity could appear if the price registers a false breakdown with a great separation below 1.0777 level. The S2 (1.0727) and the S3 (1.0645) could be used as downside targets as well.
